If you start a business, you should understand how tenuous your position can suddenly become. You might enjoy some early success, but an unforeseen lawsuit can derail all of that. Maybe a product you make hurts someone, or perhaps you must deal with a wrongful termination lawsuit. Even if you feel your company did nothing wrong, you must address these situations immediately if they occur.
Contingency fees normally constitute 33% of your total winnings if you win a lawsuit, but that doesn’t mean someone who successfully sues you won’t still walk with millions. That depends on whether you decide to settle, whether you elect to go to trial, and also whether you merely inconvenienced this person or your company did them some serious harm.
In this article, we’ll talk about how a lawsuit can impact your company. We’ll also discuss how you can pick up the pieces afterward.
The Possible Financial Repercussions
An individual can sue your company for all kinds of reasons. We already mentioned a product you make hurting someone. That often happens if you didn’t test the product well enough before you released it. However, sometimes a product will get through testing okay but still hurt someone in a way that you didn’t expect.
If enough of your products hurt enough people, then you might face a class action lawsuit. That’s when you may endure an even more devastating financial outcome than you might if you’re just dealing with a single plaintiff.
Someone might also sue you if they believe a person within your company sexually assaulted or harassed them. Maybe they’ll sue for a hostile work environment if they believe someone said or did something inappropriate based on the employee’s race, age, religion, sexual orientation, etc.
No matter why this person or these people sue your company, though, it’s likely that you’ll face some financial penalties. It’s true that you can fight the lawsuit in court, and you might win, but that means hiring a lawyer, which represents a significant expenditure.
That’s why many companies settle if someone sues them. Maybe you don’t feel like you’re at fault, but you might still agree to give the plaintiff a sum of money if you feel like that won’t hit your finances as hard as hiring a lawyer and having to hash the matter out in court.
Also, keep in mind that your business might have to deal with negative publicity the longer you are in the public eye. You may want to settle with the plaintiff simply because you want to bury the matter with as little fuss as possible.
Employee Morale
After that, you must assess whether your company can continue functioning after the financial hit it took. Assuming you think that it can, you will probably address your workers next.
You might do that by writing a speech, calling the company together, and reading it to them. Maybe you will draft and send a company-wide email instead.
No matter what you do, you’ll need to try to get everyone back into a better headspace. Employee morale matters, and this kind of thing can easily shake it.
Getting Rid of the Guilty Party
If you determine that there’s someone within the company who did something wrong, thus triggering the lawsuit, then you must get rid of them. You can probably fire them for cause if you uncover evidence that shows they did the thing of which the plaintiff accused them.
If you have someone working for your company who sexually harassed a fellow employee, for instance, or they belittled them because of their religion, race, etc., then you must not only part ways with that person as soon as you can. You should also conduct additional training to let the rest of the employees know that is unacceptable conduct.
You might hire someone who can conduct workshops that make the objectionable behavior a focal point. You may already do that as part of your company culture, but you must make doubly sure that everyone knows you take these matters seriously.
Addressing Your Investors
Addressing your investors will probably come next. Maybe you have several well-heeled individuals who helped get the company off the ground. Perhaps you had an angel investor or a venture capital firm that backed you.
No matter who funds the company, you must talk to them about what happened and what you did to address it. You must put out this fire. If you can convince the individuals who support you financially that this will never happen again, then hopefully they won’t pull their funding.
Hiring a Crisis Management Team
You might also want to give some strong thought to hiring a crisis management team. Such a team has probably seen many situations like yours before.
They will meet with you and any other highly-placed individuals within the company and discuss your options. They might feel like you should have a restructuring of the top executives. Maybe they will want you to call a press conference to address the media. That all depends on your company’s size and prominence.
If you have a smaller company, maybe you can keep things relatively quiet. If you are running a large company, though, and you know that this story got out and it is running wild on TV and social media, then you’ll probably need to make a formal statement.
You will likely have to apologize, even if you didn’t personally do anything wrong. If this problem occurred on your watch, then you must accept some responsibility, even if doing so doesn’t feel very good.
Just like your workers and your financial backers, you must appeal to the potential customer base and ask them to forgive the company and to give you another chance. If you can tell them the concrete actions you’ve taken to ensure you won’t have this issue going forward, then hopefully you can start moving past what happened.
